But a more troubled world need not mean that individual countries in our region will be equally hurt. Three factors will determine which countries might perform better: The first will be the ability to negotiate better trade outcomes with big players such as the US and China. The next factor will be how much policy space a country has to contain the near-term shocks that are likely. A final factor will be the capacity to sniff out and exploit opportunities that will still emerge even in a difficult global environment.
Financial markets have recovered much of the ground lost after US President Donald Trump launched his trade war against the rest of the world. Last weekend’s agreement between China and the US to lower tariffs and pursue further negotiations appears to have reassured investors that the world can avoid the painful consequences of what will still be a highly protectionist global economy.
This view is simply far too optimistic. We must look beyond the trade war and consider the entirety of the changes being wrought in the US and elsewhere to gain a clear understanding of where the world economy is heading. We would argue that when the dust settles, the world will still be in a difficult place, marked by much worse protectionism than before, as well as by geopolitical and financial stresses.
